The Competition and Consumer Commission of Singapore (CCCS) has issued a provisional Statement of Decision (SDP) to Wilhelmsen (WMS) and Drew Marine (DMTS). The Commission found that the proposed acquisition by WMS of sole control over DMTS is likely to result in a substantial lessening of market competition for the supply of marine water treatment chemicals in Singapore.
As such, the proposed transaction infringes section 54 of the Competition Act (Cap. 50B) which prohibits anti-competitive mergers, while it could lead to higher prices and/or a reduction in choice and quality of supply of marine water treatment chemicals for customers that require deliveries in Singapore.
On 10 August 2017, CCCS received a notification for decision on whether the Proposed Transaction would infringe the section 54 prohibition. WMS and DMTS overlap in the supply of marine chemicals (marine cleaning chemicals, marine water treatment chemicals and marine fuel oil treatment chemicals), marine gases (marine welding gases and marine refrigerant gases) and marine welding equipment.
The Phase 1 review of the Proposed Transaction was completed on 29 September 2017. Based on information furnished by the WMS and DMTS and third party feedback, CCCS “was unable to conclude that the Proposed Transaction would not raise competition concerns“.
The Proposed Transaction proceeded to a Phase 2 review on 27 October 2017, following CCCS’s receipt of the Parties’ Form M2 and other relevant documents.
- CCCS has provisionally found that the Parties’ combined market share in the supply of marine water treatment chemicals in Singapore is substantial, as the next largest competitor has less than one-twentieth of the Parties’ combined market share. The Parties’ substantial market position stem from the quality of their global supply networks, including stock availability, consistency, and service and response times.
CCCS has found that, in contrast to other suppliers, the Parties are able to supply their products across a wide range of ports globally, and have sufficient stock availability across a range of products that enable them to respond quickly to the delivery needs of their customers’ vessels calling at these ports. In addition, the Parties are able to provide strong technical support and ancillary value-added services across their supply networks, and are viewed by customers as having overall reliability in the supply of marine water treatment chemicals.
- Furthermore, the Commission found that the Parties are each other’s closest competitor. The closeness of competition between the Parties can be seen from the recent capture of significant market share from WMS by DMTS in the supply of marine water treatment chemicals in Singapore.
Further, the Parties’ perceptions of each other as set out in their internal strategic documents, customer purchasing data and feedback, as well as the Parties’ internal weekly sales reports relating to customer contracts won and lost, support this provisional finding that the Parties are each other’s closest competitor.
- CCCS is of the provisional view that post-Transaction, competitive pressure from existing players in this market (e.g. through bidding for the same customer) will not likely be sufficient, and any potential entry by competitors will also not likely be timely and sufficient in extent to offset the anti-competitive effects of the Proposed Transaction.
In addition, given that each customer constitutes a small fraction of the Parties’ sales, and self-supply by customers is generally not feasible, customers would not likely be able to counteract the merged entity’s ability to raise prices post-Transaction.
The Parties now have 10 working days from the receipt of the SDP to make their representations to CCCS, which will then decide whether to issue a favourable or unfavourable decision, after consideration of the representations, as well as all available information and evidence.
